PBC Environmental--wholesaler owned by Hub International--helps agents with mid-market risks
By Phil Zinkewicz
Environmental exposures are usually associated with large, monolithic organizations--chemical firms, gas and oil companies, or manufacturers of volatile products. If mishandled, these exposures can cause serious damage to the environment. As a result, federal and state regulatory officials keep a watchful eye on these industries, threatening fines or worse for those who do not stick rigidly to the mandates of environmental laws. Moreover, plaintiffs' attorneys have found a gold mine in class action lawsuits against alleged environmental miscreants.
But large corporations are not the only ones affected by potential environmental exposures. Middle market commercial entities are in danger of experiencing environmental difficulties as well, and they may not even be aware that these exposures exist.
In fact, virtually every business and parcel of property can pose a pollution risk, and the opportunities for an environmental lawsuit by private parties and government agencies are considerable. Marshalling a legal defense for even a groundless lawsuit can cost thousands of dollars, potentially bankrupting a small or mid-sized company.
Consider the following hypothetical situations:
* Solvents used to clean kitchen equipment in a restaurant are being disposed of "out the back door." Over time, they have found their way down into an underground water supply. The town then sues the restaurant for polluting its drinking water.
* A builder completes construction of a condominium on a landfill that was previously vacant for years. Despite the builder's "due diligence," it is later discovered that the landfill is contaminated. Both the condominium association and the local health department sue the builder.
* A bank holds a large mortgage on a local shopping center strip. After the borrower learns that the property is polluted, he defaults on the loan. The bank forecloses and is stuck not only with the bad loan but also with the cleanup costs of the contaminated property.
These scenarios are more common than people realize. That's the bad news. The good news is that environmental insurance coverages are out there. Not only that, but, according to John Butler, vice president and environmental practice leader for Program Brokerage Corp. (PBC), environmental insurance coverages also are affordable, despite the current hard market for most other lines of insurance. In addition, the particularly good news for independent agents, says Butler, is that the environmental insurance arena for middle market exposures might very well represent a new and lucrative source of income.
Last year, Hub International Limited announced that its New York City-headquartered PBC formed PBC Environmental, a specialized facility offering "in-house" environmental risk management solutions to PBC's producer network of more than 1,000 agents and brokers.
Hub International currently has nine large "hub" brokerages, as well as wholesale facilities such as PBC, that have significant market presence in their geographic regions in the United States and Canada. Each hub provides insurance brokerage services and manages the various smaller Hub International brokerages in its territories. A leading North American brokerage, Hub International has grown rapidly since its formation in 1998, through acquisitions, mergers and organic growth.
Hub's new PBC Environmental facility--which targets middle market real estate, manufacturing and contracting businesses as well as financial institutions, environmental engineers and consultants--is headed by Butler, who has spent the last 10 years specializing in environ-mental risk management and coverage placement.
"In the past, agents and brokers dealt with environmental exposures in a 'reactive' fashion," says Butler. "That is to say, if an agent's client approached the agent and said it feared it had an environment exposure, then the agent would make an effort to respond to that need. Our goal is to assist our agents in becoming more 'proactive' in the sense that they, with our help, will be able to approach their clients and inform them of the environmental exposures they face, and then place the coverage. Middle-sized businesses face many of the same first- and third-party environmental risks as larger firms. But local producers are sometimes apprehensive about the complexity of assessing and responding to those risks, or they may not have the carriers they need for the coverages readily available. We can solve that by acting as the producer's 'environmental department.' If a producer wishes, we'll attend client or lender meetings and design a program that responds to a particular opportunity for the client."
Therefore, according to Butler, PBC's "mission" is to provide producers with a sort of comfort level with environment insurance issues so that selling these coverages can become a profit center for them. "Many businesses and their agents are not aware that they have environmental exposures," says Butler. "For example, indoor air quality is a huge environmental exposure that affects virtually every area of the real estate arena. This is where you get your mold claims. The regular insurance market has stopped writing coverage for mold, but it is available from specialty environmental insurers, and the premiums are affordable. Moreover, many banks and other mortgage lenders require environmental insurance before completing the lending transaction."
It may seem odd that an insurance coverage usually considered a volatile one is so available in today's difficult insurance marketplace where other commercial coverages are experiencing high increases and, in some cases, unavailability problems. But Butler says that it is not strange at all.
"The environmental insurance market stands apart from the regular marketplace," he says. "During the last soft market, standard insurance companies were writing the business; but when the hard market came, they pulled out. But the specialty environmental insurers stayed in and there are more specialty underwriters coming into the market every year. That creates a healthy competition, which keeps prices affordable. Today, it is a buyers' market for environmental insurance and agents should realize that the opportunities are here right now. They can negotiate multiyear contracts for three, four or five years, locking in an affordable premium in case the market turns down the line. Who knows what will happen in the future, so agents should get in while the getting's good."
Butler says that the response to the new PBC program has already been more than encouraging. "Almost immediately after we issued the press release, we were inundated with inquiries from all over the United States and Canada. Our PBC agents are coming to us with an amazing variety of environmental exposures. Non-PBC agents are contacting us as well, and they are welcome to do so.
"We want to educate all our agents about the environmental insurance process," continues Butler. "Many agents and insureds believe that the underwriting process is an onerous one. That simply is not true. Environmental insurers have products that take the due diligence process right off the backs of insureds and the application process is very straightforward."
PBC Environmental operates in all 50 states and utilizes Chubb, AIG, Liberty and XL Environmental for environmental coverages.
So, for agents who are looking to increase revenues by targeting specialty niches, the middle market environ-mental insurance arena might just be a place to go, according to Butler. *
For further information:
PBC Environmental
Contact: John Butler
E-mail: jbutler@programbrokerage.com